By Kristen Hayer
Last week I wrote an article about the 5 Key Decisions you need to make in order to build an effective customer success compensation plan. This week I’m going to focus on how to get your comp plan ready and roll it out successfully. Execution can make the difference between a plan that drives high performance, and (as this Forbes article highlights) a plan that gets you into serious financial or legal trouble. Here are 5 steps you should take to make sure your plan drives the desired results.
Step 1: Model Performance Expectations
When you built the plan, you established the expectations for a typical performer. On average, your team members should hit their goals and achieve 100% of their variable compensation. As a test, build a model of what both a low and high performer would earn under your current plan. Ask yourself if there is enough of a difference between the 3 levels of performance. Will your top performers feel like the reward justifies the extra work they put in? Will the low performers step it up or move on? If not, you may need to revisit your plan before you roll it out.
Step 2: Consider Negative Side Effects
People can be very creative, and some members of your team may look for loopholes in your plan. Generally, a few simple ground rules can help you avoid this problem, so think about the ways that someone could game the system. Aside from this obviously negative side effect, there can be another, subtle problem - a shift in focus. If your team has a compensation plan which rewards a single goal that can cause your team to neglect other, important aspects of the job. Make sure your compensation program is balanced to avoid this problem.
Step 3: Document Clearly
Write up the plan details and rules in simple, clear language. It shouldn’t take a lawyer to interpret a compensation plan. That said, you do need to consider things like what happens if an employee leaves the company, what happens if a deal falls through, and what happens if the CSM moves to another territory. Most HR departments have a compensation plan template, and most of them are too complicated. However, they can serve as a good starting point, and can help ensure that you cover all key points.
Step 4: Get Necessary Approvals
Depending on the size and maturity of your company, you’ll have different hoops to jump through to get your plan approved. Start with your boss. In small organizations, that may be enough. In larger companies your plan will probably need to go through the HR, finance and possibly legal teams. If you do need your legal team’s approval, push back on any jargon and ask them to use simple language. If they insist on legalese, be sure to have them explain any clauses you don't understand. Don’t communicate anything to your team without full approval.
Step 5: Communicate (Almost) Excessively
When you’re ready to go over your new compensation plan with your team, expect to feel like that’s all you ever talk about for a while. You should roll out the program to the team in a meeting, where you’ll cover general details like how the plan works, what it rewards, how you’ll measure results, and when the team will be paid. Then go over plans individually with each team member to review any details that are specific to them, as well as answer questions that they might have. Once team members have had a chance to review their new plans, expect a lot more questions over the next few weeks. You should also start to review performance against plans in weekly one-on-one meetings once the program goes live.
These 5 steps should help you avoid the potential downside of variable compensation, and ensure that your team embraces their new plan. If this is your team’s first experience with variable comp, thoroughly planning the roll out will help alleviate any fears they might have. If your team has been on a variable plan before, they will appreciate having a simple plan that clearly explains how to earn money. Best of luck as you plan for 2018!
Need ideas for your compensation plan? The Success League is a customer success consulting firm that offers an online course on Developing Compensation Plans. Our next classes are offered on October 10 and November 17, 2017. For more information on this class, as well as other courses in our CS Leadership Program, please visit TheSuccessLeague.io